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The Securities & Investment Institute believes the financial services sector is in the grip of a recruitment freeze, reflecting employer sentiment at its lowest point since its records began in 2002.

The SII bases its assertion on the number of reference checks being carried out by financial service firms with the institute.

Simon Culhane, chief executive of the SII, said: “Data for February shows firms’ interest in recruiting new staff slowing down quite considerably, which is consistent with hiring freezes as firms respond to the continuing turmoil in the financial markets and an overall decline in confidence.”

The highest number of reference checks performed by the SII for financial service firms was in July 2007, a “peak” ahead of the emerging sub-prime problems when consumer confidence was high and the forecast bullish, according to Mr Culhane.

There was also a desire by the financial services to beef up

operation areas ready for the implementation of MiFID in November 2007.

Usual peaks for SII reference checks occur in February and March after financial services employees have banked their year-end bonuses and are looking to change firms. Low points annually tend to be in October and November, following the end of annual graduate recruitment drives.

Mr Culhane said the SII experienced an 84 per cent decrease in reference checks last July, which he perceived as being “exactly in step with the confirmed news of the credit crunch” and believes recruitment is “frozen among the major firms”.

However, Joslin Rowe, a UK recruitment consultancy which claims to work with 95 per cent of London's top financial institutions, is more bullish.

Nabila Sadiq, managing director of Joslin Rowe, said: “The perception is that jobs in London’s financial services industry have dried up, however the reverse is true. Firms are increasingly turning to the flexibility of six to nine month hiring contracts as opposed to the commitment of a permanent hire. There is a real skills shortage. Demand for top financial talent is as strong as ever.”

Joslin Rowe claims that in April 2008 there were 40,950 temporary financial services job vacancies and only 12,700 temporary candidates available.